The Natural Rate of Unemployment Exercise1 Use the table below to answer the fol
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The Natural Rate of Unemployment Exercise1 Use the table below to answer the following questions: Number of People (In miliilons) ed Labor Force Employed 157.3 5.2 5.3 2.9 Cyclically unemployed Frictionally unemployed Instructions: Round your answers to 2 decimal places. a. Calculate the actual unemployment rate and the natural rate of unemployment for this economy Actual rate of unemployment: 7% Natural rate of unemployment % b. Now assume that cyclical unemployment decreases by 17 million while structural unemployment increases by o.S million. Caiculate the unemployment rate and the natural rate of unemployment for this economy Actual rate of unemployment Natural rate of unemploymentExplanation / Answer
a) Total Number of people = 157.3+5.2+5.3+2.9 = 170.7 millions
Number of people unemployed = Structurally unemployed+Cyclically unemployed+Frictionally unemployed
= 5.2+5.3+2.9 = 13.4 millions
Actual Rate of Unemployment = (No. of people unemployed/Total No. of people)*100
= (13.4 millions/170.7 millions)*100 = 7.85%
Natural unemployed people = Structurally unemployed+Frictionally unemployed
= 5.2+2.9 = 8.1 millions
Natural Rate of Unemployment = (Natural unemployed people/Total No. of people)*100
= (8.1 millions/170.70 millions)*100 = 4.75%
b) New data after change is shown as follows
Total Number of people = 157.3+5.7+3.6+2.9 = 169.5 millions
Number of people unemployed = Structurally unemployed+Cyclically unemployed+Frictionally unemployed
= 5.7+3.6+2.9 = 12.2 millions
Actual Rate of Unemployment = (No. of people unemployed/Total No. of people)*100
= (12.2 millions/169.5 millions)*100 = 7.20%
Natural unemployed people = Structurally unemployed+Frictionally unemployed
= 5.7+2.9 = 8.6 millions
Natural Rate of Unemployment = (Natural unemployed people/Total No. of people)*100
= (8.6 millions/169.5 millions)*100 = 5.07%
Labor Force Number of People (in millions) Employed 157.3 Structurally unemployed 5.7 (5.2+0.5) Cyclically unemployed 3.6 (5.3-1.7) Frictionally unemployed 2.9Related Questions
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